Adopting a hawkish tone, governor Andrew Bailey said it was “much too early” to think about cuts to interest rates and that they would “remain where they are now for an extended period of time to get inflation back to target.”
The latest economic forecasts showed that the economy will skirt with recession in 2024 as the BoE said there will be zero growth next year, when the next General Election is set to take place.
The latest figures make glum reading for Rishi Sunak who vowed to get the economy growing. However, in better news for the beleaguered prime minister, the BoE’s forecast shows it is likely to meet its target to halve inflation by the end of this year.
At a press conference Mr Bailey said: “Inflation is falling, and we expect it to keep falling this year and next. Our increases in interest rates are working to bring inflation back to the 2 per cent target.
“So today we have voted to maintain the Bank Rate at 5.25 per cent. Monetary policy remains restrictive. Let me be clear, there is absolutely no room for complacency. Inflation is still too high.
“We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2 per cent target.
“We will be watching closely to see if further increases in interest rates are needed. But even if they are not, it is much too early to be thinking about rate cuts.”
Labour said the figures were going in the “wrong direction” and said it was indicative of 13 years of “economic failure” from the Tories.
Chancellor Jeremy Hunt said: “Inflation is falling, wages are rising and the economy is growing”. He added that he will unveil measures in the Autumn Statement to boost economic growth.
Experts believe the decision to hold interest rates could provide a boost to the housing market, but little joy is likely to be felt elsewhere as the cost of living continues to leave household budgets squeezed.
Responding to the rate freeze, Joseph Rowntree Foundation chief economist Alfie Stirling said: “Even the continued pause on interest rates at 5.25 per cent brings little relief to millions of families already struggling.
“People are in the grip of a suffocating squeeze from three sides – high and rising prices yet to stabilise, rising costs of debt that are still feeding through to mortgages and loans, and most recently a sharp increase in unemployment with more and more jobs at risk.”
Hitting a more positive note, Matt Thompson, head of sales at London-based estate agent Chestertons, said: “Today’s news that rates remain unchanged provides at least some certainty that the cost of borrowing won’t increase further for the time being, which will likely result in more house hunters entering the market before the year ends.”
Sam Mitchell, CEO of Purplebricks online estate agent, said the BoE’s decision to keep rates the same was “extremely positive for the housing industry.”
They added: “The decision to hold interest rates is more good news for the sector following a rise in prices during October, which is reflected in the increasingly competitive rates banks are offering to consumers.
“This has meant an increase in activity which, while perhaps too late to affect this year’s data dramatically, bodes well for a good start to 2024.”
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies